Exhibit (g)(2)
FIRST AMENDMENT
TO
CUSTODY AGREEMENT
This instrument dated May 7, 2001 is a First Amendment to that certain Custody
Agreement between PITCAIRN FUNDS, a business trust organized under the laws of
the State of Delaware (the "Fund") and The Northern Trust Company (the
"Custodian") dated as of July 31, 2000 (the "Custody Agreement").
WHEREAS, the parties desire to amend the Custody Agreement to incorporate the
requirements of Rule 17f-7 under the Investment Company Act of 1940 (the "1940
Act").
NOW, THEREFORE, the parties agree that the Custody Agreement shall be amended as
follows:
2. The following definitions shall be added to Section 1 of the Custody
Agreement:
" `Eligible Securities Depository' shall have the same meaning as in
Rule 17f-7 under the 1940 Act."
" `Foreign Assets' means any investments (including foreign
currencies) for which the primary market is outside the United States,
and any cash and cash equivalents that are reasonably necessary to
effect the Fund's transactions in those investments."
" `Rule 17f-7' shall mean Rule 17f-7 under the 1940 Act."
3. The following shall replace the definition of "Sub-Custodian" under Section
1(n) of the Custody Agreement:
" `Sub-Custodian' shall mean and include (i) any branch of the
Custodian, and (ii) any `eligible foreign custodian,' as that term is
defined in Rule 17f-5 under the 1940 Act, approved by the Fund or a
Delegate of the Fund in the manner required by Rule 17f-5. For the
avoidance of doubt, the term `Sub-Custodian' shall not include any
Eligible Securities Depository."
4. The following shall replace Sections 3, 3A and 4 of the Custody Agreement:
"3. Appointment and Removal of Sub-Custodians.
------------------------------------------
(a) The Custodian may appoint one or more Sub-Custodians to act as
sub-custodian or sub-custodians of Securities and moneys at any time held
in any Portfolio, upon the terms and conditions specified in this
Agreement. The Custodian shall oversee the maintenance by any Sub-Custodian
of any Securities or moneys of any Portfolio.
(b) The Agreement between the Custodian and each Sub-Custodian described in
clause (ii) of Section 1(n) and acting hereunder shall contain all
provisions set forth in Rule 17f-5(c)(2)(i), and any other provisions
necessary to comply with Rule 17f-5 under the 1940 Act.
(c) Prior to the Custodian's use of any Sub-Custodian described in clause (ii)
of Paragraph 1(n), the Fund or a Delegate of the Fund must approve such
Sub-Custodian in the manner required by Rule 17f-5 and provide the
Custodian with satisfactory evidence of such approval.
(d) The Custodian shall promptly take such steps as may be required to remove
any Sub-Custodian that has ceased to be an "eligible foreign custodian" or
has otherwise ceased to meet the requirements under Rule 17f-5. If the
Custodian intends to remove any Sub-Custodian previously approved by the
Fund or a Delegate of the Fund pursuant to paragraph 3(c), and the
Custodian proposes to replace such Sub-Custodian with a Sub-Custodian that
has not yet been approved by the Fund or a Delegate of the Fund, it will so
notify the Fund or a Delegate of the Fund and provide it with information
reasonably necessary to determine such proposed Sub-Custodian's eligibility
under Rule 17f-5, including a copy of the proposed agreement with such
Sub-Custodian. The Fund shall at the meeting of the Board of Directors next
following receipt of such notice and information, or a Delegate of the Fund
shall promptly after receipt of such notice and information, determine
whether to approve the proposed Sub-Custodian and will promptly thereafter
give written notice of the approval or disapproval of the proposed action.
(e) The Custodian hereby represents to the Fund that in its opinion, after due
inquiry, the established procedures to be followed by each Sub-Custodian in
connection with the safekeeping of property of a Portfolio pursuant to this
Agreement afford reasonable care for the safekeeping of such property based
on the standards applicable in the relevant market.
3A. Delegation of Foreign Custody Management.
----------------------------------------
(a) The Fund hereby delegates to the Custodian (who will be this Delegate
referred to in Section 3) the responsibilities set forth in
subparagraph (b) below of this Section 3A, in accordance with Rule
17f-5 with respect to all foreign custody arrangements for the Fund's
existing and future investment portfolios, except that the Custodian
shall not have such responsibility with respect to Eligible Securities
Depositories or with respect to custody arrangements in the countries
listed on Schedule I, attached hereto, as that Schedule may be amended
from time to time by notice to the Fund.
(f) The Custodian may place and maintain the Fund's Foreign Assets in the care
of a Sub-Custodian (a "Foreign Custodian"), provided that with respect to
each arrangement with any Foreign Custodian (other than Sub-Custodians in
the countries listed in Schedule I)
regarding the assets of any investment portfolio of the Fund for which the
Custodian has responsibility under this Section 3A:
(i) the Custodian shall determine that the Fund's assets will be
subject to reasonable care, based on the standards applicable to custodians in
the relevant market, if maintained with the Foreign Custodian, after considering
all factors relevant to the safekeeping of such assets including, without
limitation, the factors set forth in Rule 17f-5(c)(l)(i)-(iv);
(ii) The arrangement with the Foreign Custodian should be governed by
a written contract that the Custodian has determined complies with the
requirements of Rule 17f-5 and will provide reasonable care for the Fund's
assets and will include all provisions set forth in Rule 17f-5(c)(2)(i);
(iii) establish a system to monitor the appropriateness of maintaining
the Fund's assets with such Foreign Custodian and performance of the contract
governing the Fund's foreign custody arrangements;
(iv) provide to the Fund's Board of Directors, at least annually,
written reports notifying the Board of the placement of the Fund's assets with a
particular Foreign Custodian and quarterly reports of any material changes to
the Fund's foreign custodian arrangements; and
(v) withdraw the Fund's assets from any Foreign Custodian as soon as
reasonably practicable, if the foreign custody arrangement no longer meets the
requirement of Rule 17f-5.
5. Use of Sub-Custodians and Securities Depositories.
-------------------------------------------------
With respect to property of a Portfolio which is maintained by the
Custodian in the custody of a Sub-Custodian pursuant to Section 3:
(a) The Custodian will identify on its books as belonging to the particular
Portfolio any property held by such Sub-Custodian.
(b) In the event that a Sub-Custodian permits any of the Securities placed in
its care to be held in an Eligible Securities Depository, such
Sub-Custodian will be required by its agreement with the Custodian to
identify on its books such Securities as being held for the account of the
Custodian as a custodian for its customers.
(c) Any Securities held by a Sub-Custodian will be subject only to the
instructions of the Custodian or its agents; and any Securities held in an
Eligible Securities Depository for the account of a Sub-Custodian will be
subject only to the instructions of such Sub-Custodian.
(d) The Custodian will only deposit property of a Portfolio in an account with
a Sub-Custodian which includes exclusively the assets held by the Custodian
for its customers, and will cause such account to be designated by such
Sub-Custodian as a special custody account for the exclusive benefit of
customers of the Custodian.
(e) Before any Securities are placed in an Eligible Securities Depository, the
Custodian shall provide the Fund's Board of Directors or its investment
adviser and subadvisers, as directed by the Board, with an analysis of the
custody risks associated with maintaining assets with the Eligible
Securities Depository.
(f) The Custodian or its agent shall monitor the custody risks associated with
maintaining the Securities with an Eligible Securities Depository on a
continuing basis and shall promptly notify the Fund's Board of Directors or
its investment adviser or subadviser, as directed by the Board, of any
material changes in said risks, and act promptly in accordance with
instructions from the Fund to withdraw or otherwise dispose of the affected
Foreign Assets."
6. The following shall replace Sections 16(b)(1) and 16(b)(2) of the Custody
Agreement:
"1. The Custodian will use reasonable care, prudence and diligence
with respect to its obligations under this Agreement and the
safekeeping of property of the Portfolios such as a person having
responsibility for the safekeeping of the Fund's assets, including its
Foreign Assets, would exercise. The Custodian shall be liable to, and
shall indemnify and hold harmless the Fund from and against any loss
which shall occur as the result of the failure of the Custodian or a
Sub-Custodian to exercise reasonable care, prudence and diligence with
respect to their respective obligations under this Agreement and the
safekeeping of such property. The determination of whether the
Custodian or Sub-Custodian has exercised reasonable care, prudence and
diligence in connection with their obligations under this Agreement
shall be made in light of prevailing standards applicable to
professional custodians in the jurisdiction in which such custodial
services are performed. In the event of any loss to the Fund by reason
of the failure of the Custodian or a Sub-Custodian to exercise
reasonable care, prudence and diligence, the Custodian shall be liable
to the Fund only to the extent of the Fund's direct damages and
expenses, which damages, for purposes of property only, shall be
determined based on the market value of the property which is the
subject of the loss at the date of discovery of such loss and without
reference to any special condition or circumstances.
2. The Custodian will not be responsible for any act, omission, or
default of, or for the solvency of, any Eligible Securities
Depository."
7. The following shall replace Section 16(h):
"(h) INDEMNIFICATION. The Fund agrees to indemnify and hold the
Custodian harmless from all loss, cost, taxes, charges, assessments,
claims, and liabilities (including, without limitation, liabilities
arising under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the 1940 Act and state or foreign securities laws) and
expenses (including reasonable attorneys fees and disbursements)
arising directly or indirectly
from any action taken or omitted by the Custodian (i) at the request
or on the direction of or in reliance on the advice of the Fund or in
reasonable reliance upon the Prospectus or (ii) upon an Instruction;
provided, that the foregoing indemnity shall not apply to any loss,
cost, tax, charge, assessment, claim, liability or expense to the
extent the same is attributable to the Custodian's or any
Sub-Custodian's negligence, willful misconduct, bad faith or reckless
disregard of duties and obligations under this Agreement or any other
agreement relating to the custody of Fund property."
In all other respects the Custody Agreement shall remain in full force and
effect as originally written.
IN WITNESS WHEREOF, the parties have executed this First Amendment, intending it
to be effective as of the date written above.
PITCAIRN FUNDS
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
THE NORTHERN TRUST COMPANY
By: /s/ Xxxxx X. Xxxxxxx
---------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
